Alcoa Stock Falls On Outlook; Nucor, Steel Dynamics Crush Views


Nucor (NUE) on Thursday joined Steel Dynamics (STLD) in easily clearing Q1 earnings estimates and predicting a record profit in Q2. However, Alcoa‘s (AA) outlook after Wednesday’s close was tempered by higher costs and lower production. AA stock fell early Thursday, while NUE and STLD gained some ground.


Both Nucor and Steel Dynamics, which reported late Wednesday, highlighted strength in nonresidential construction markets.

Both steel and aluminum prices have surged since Russia’s Feb. 24 invasion of Ukraine amid high natural gas prices and supply disruption worries. While the Russian invasion reversed a dive in steel prices, it turned up the heat on already-sizzling aluminum prices.

Alcoa noted $115 million in extra raw materials costs this quarter. Management also said it will curb supply of bauxite, the feedstock for alumina and aluminum in response to its exit from supplying Russia.

BMO Capital Markets analyst David Gagliano trimmed his target for AA stock to 95 from 99, keeping a market perform rating. He cited bauxite production and cost pressures as making for a “somewhat temepered” outlook.

Earnings are due from steelmaker Cleveland-Cliffs (CLF) on Friday.

STLD, NUE and CLF stocks all scored breakouts in late February or early March, then continued to outperform the market.

Steel stocks are ranked No. 8 among 197 industry groups based on stock performance and momentum. Nucor stock is part of the IBD Leaderboard portfolio of elite stocks, while CLF stock is part of the flagship IBD 50 list.

Nucor Earnings

Nucor earnings grew 147% from a year ago to $7.67, 37 cents ahead of estimates. Revenue rose 49% to $10.49 billion, edging past views.

Nucor noted decreased profitability for its sheet mills in Q1 due to softer pricing amid increased imports and modest destocking of inventories. However, an upturn in prices should yield higher profit for the sheet and plate mills in Q2.

NUE stock added 6.8% to 180.81 in early Thursday stock market action. Nucor stock closed just off an all-time high on Wednesday, having climbed 34% since its Feb. 25 breakout.

Steel Dynamics

Steel Dynamics earnings per share surged 187% to $6.02, beating by 36 cents. Revenue grew 57% to $5.57 billion vs. estimates of $5.32 billion.

Steel Dynamics said the results, which came despite lower hot roll coil pricing earlier in the quarter, reflected a near doubling of operating income for its steel fabrication operations.

“The non-residential construction sector remains strong, resulting in a record order backlog with record forward-pricing for the company’s steel fabrication platform,” the company said.

Meanwhile, Steel Dynamics said its Sinton, Texas, mill coming online should ship about 1.5 million tons this year.

STLD stock rose 5.7% to 96.72 early Thursday. That more than recouped STLD’s 0.5% decline on Wednesday ahead of earnings. STLD stock had finished at an all-time closing high on Tuesday.

Alcoa Stock 

Alcoa earnings per share vaulted 287% to $3.06, 13 cents ahead of views. Revenue grew 15% to $3.293 billion, shy of $3.45 billion estimates.

Alcoa said it expects $115 million in additional energy and raw materials costs this quarter, but said that should be more than offset by higher alumina and aluminum prices and shipments. The outlook for bauxite shipments this year was cut by 2 million dry metric tons to a range of 46-47 million.

AA stock fell 11% to 77.22 on Thursday, dipping below its 50-day line. On Wednesday, AA stock fell to its 50-day/10-week line, then rebounded for a 0.4% gain to 86.92.

AA stock remains more than 50% above December’s buy point.


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